As the US, Japan, and Taiwan accelerate their alliance... The government must step up to protect the 'Semiconductor Powerhouse'

Semiconductor-related exhibits, including ultra-small image sensors, are displayed at the Samsung Electronics Delight Exhibition Hall in Seocho-gu, Seoul. [Image source=Yonhap News]

[Asia Economy Reporters Heungsun Kim and Hyunjin Jung] The semiconductor hegemony competition is shifting from individual companies' investments and technological capabilities to a power struggle backed by government support. There are calls for South Korea, which heavily depends on the private sector, to accelerate the preparation of countermeasures. As the United States strengthens semiconductor alliances with Asian countries such as Taiwan and Japan to contain China and reorganize the global supply chain centered on its own country, South Korea must also establish infrastructure and create momentum to increase market dominance through government-level support measures.

Strengthening the Triangular Alliance, Concurrent Domestic Support

According to industry sources on the 21st, major countries including the United States, Japan, and Taiwan are strengthening collaboration through facility investments while also enhancing domestic support for the semiconductor industry under government leadership.

The United States is actively supporting this effort, led by the CHIPS and Science Act. This legislation aims to secure semiconductor production facilities within the U.S. and provides funding of $52 billion (approximately 61 trillion KRW) over five years to build and modernize semiconductor manufacturing facilities. Additionally, the FABS Act offers a 25% tax credit on semiconductor facility investments.

Japan, considering that it takes a long time to nurture its domestic semiconductor companies, has recently adopted an industrial development strategy focused on attracting manufacturing facilities of overseas semiconductor companies, including Taiwan's TSMC, and cooperating on technology development. It is also concentrating on strengthening advanced semiconductor design capabilities and supporting the return of Japanese semiconductor companies that have moved overseas to restore the manufacturing base.

Taiwan actively supports its domestic semiconductor companies while establishing advanced semiconductor process centers to attract foreign companies. It has also enacted laws to prevent the outflow of core semiconductor technologies and personnel to China, paying close attention to protecting technology and human resources.

Time is of the Essence... Active Support Needed in Taxation, Infrastructure, and Workforce
Urgent Proposal and Passage of the Semiconductor Support Special Act

As the ties among these three countries strengthen, South Korean semiconductor companies could face significant threats. The DRAM sector, where Micron is reportedly building a new factory in Hiroshima Prefecture, Japan, is a field led globally by South Korean companies such as Samsung Electronics and SK Hynix. As of the second quarter, domestic companies hold a market share of 71%, with Micron ranking third at 22.6%.

Micron is also strengthening its dominance in the NAND flash memory sector by mass-producing the world's first 176-layer product in August. From the U.S. perspective, collaboration with Japan is expected to expand the supply chain and improve market share. For Japan, this is positive as it increases domestic employment.

TSMC, the world's number one foundry (semiconductor contract manufacturing), is also establishing a new factory in Kumamoto Prefecture, Japan, to attract local customers. Japan is expected to benefit from this alliance by supporting the semiconductor supply for its domestic companies.

Some compare this situation to the past when Japan, once a semiconductor powerhouse, lost industrial competitiveness due to U.S. containment. There are concerns that if South Korea is sidelined in such government-level alliances, it could face a crisis.

So far, individual companies like Samsung Electronics and SK Hynix have led the market with timely investments and technological development. However, to respond comprehensively not only in memory but also in system semiconductors, government support is increasingly seen as essential.

Already, related industries and academia have called for the enactment of a Semiconductor Support Special Act, requesting necessary support in tax benefits, infrastructure construction, and workforce development. While the political and government sectors agree, the bill's proposal has been delayed due to considerations of fairness with other industries.

Kim Yang-peng, a senior researcher at the Korea Institute for Industrial Economics and Trade, said, "It is important to provide tax benefits, workforce training, and full support for downstream industries so that companies can enhance their market competitiveness," adding, "The Semiconductor Support Special Act should be enacted quickly to enable tangible support."

This content was produced with the assistance of AI translation services.